tv Best Of Bloomberg Markets Middle East Bloomberg September 30, 2016 12:00am-1:01am EDT
healthful spending plunging 4.5% from a year ago. it underscores the struggle the boj still faces to get inflation 22%.o point sent -- global news 24 hours a day, powered by more than 2600 journalists in more than 120 countries. this is bloomberg. let's look at the markets in the region right now. hong kong and china closed her but here's how they were trading in the morning session. a little bit of a selloff in the region. this is the picture in singapore, tokyo, and mumbai. the quarter ending on a sour note. i'll be back in half an hour. time now for "best of bloomberg markets: middle east." ♪ yousef: welcome to "best of
bloomberg markets: middle east." hillary clinton and donald trump face off in the first presidential debate ahead of november's elections. about thed barbs state of the u.s. economy. trade and racial tension, but in the middle east, the polls played a prominent role. saudi stocks got crushed after unprecedented measures -- measures to shore up finances. asefits previously seen sacred. we look at how far saudi routers are willing to go to implement their austerity plan. but the big story dominating the entire week was the opec meeting in algiers, the surprise agreement to cut back on production. we will get you all the details. at the end of the day, opec came out with an agreement to cut , 250,000 barrels a
day on the low end and it might go up to 750,000 barrels on the high end of that range. that there was an acknowledgment that there was a tremendous amount of oil that earlierthe market since in the year. there was a sense of urgency that they had to take action and there were domestic pressures in them arabia in terms of burning through the foreign currency reserves than cutting back on government spending. there was a lot more that needs to be dealt with much quicker. fundamentally, when we spoke to the iea, they said it would take a lot longer than thought for the market to rebalance. today, news they had to act. they came out finally with that decision. let's hear from some of the voices who attended the meeting. >> we need to bring forward the
rebalancing of the markets. , we debateddo so many scenarios. , in a veryurs positive manner. understanding and in a spirit of full cooperation. >> am very happy, we had a very constructive argument. opec hadns that overcome many difficult situations. some of the oil ministers right off the back of that decision, and now we will have to wait and the have the details on how they split the production cut are going to play out.
>> and of course what it means for the long-term. absolutely. at the end of the day, the global supply demand picture has shifted. this is why they are changing strategy as an opec group, the concern about the resilience of non-opec reduction, and u.s. producers being able to step up their game as well. let me run you through what some of the analysts have been saying. nomura said what -- the agreement would take one million barrels a day off the overs -- oversupply part of the equation. that community deficit by the fourth order. a savingsaid it was measure. they would watch to see how that limitation materializes because dissentdy heard some from the iraqi delegation, pointing out that estimates of the oil production are up for
debate and they are not convinced of those numbers. pliny still to discuss and that's why we will bring in tony reagan for some additional perspective. aty, you are not impressed latest agreement. you don't make much of it, right? tony: it's a bit of a pr success, having gone into the meeting looking as if there was no chance of any agreement. they kicked the can down the road and perhaps talk again in november. at least now they have said there could be something specific in november, not laughedwhich would be at, but actual cuts. but the devil is in the details. , they are talking about a range, which could be a very modest cut of about a quarter million to slightly more
significant 700,000 barrels a day. after record high production by middle east producers. possibly tokenism. then the issue is how are they going to apply this? it wouldlready said not be applied uniformly across all members. how have they accommodated iran, who went into this meeting a greenabout seeking light to increase production to about 600,000 barrels a day. who is going to take these cuts, and for how long? said, it's close to a record high here. there is nobody doubting that, and it's very miniscule, but
isn't the point that it is significant that they are actually talking? iran have notnd gotten along for a little bit, and now they seem to be in agreement. >> of course that is significant. cuts,re talking about something they have not done for eight years. they are talking again about managing production, something they stepped away from two years ago. yes, it does look as if there seems to be a meeting of the minds between the two key iran and saudi arabia, although we have no idea yet about the details. and if iran is going to be allowed to increase production, the cuts will be more significant on some of the others. who is going to bear the brunt of the cuts? >> that is the question, for sure.
yousef: let's get back to the numbers that have been suggested. 700 million barrels a day on the aggressive end of that range. is that enough oil to take out of the market given the russia pumpingen at record levels, given that the oil rigs are coming back in the united eight. -- doeed to do more here they need to do more here? >> the devil is in the details. september production was high. it's likely to be august production which was 3.2 million barrels per day. if you go down to 3 million, that is a tiny reduction. they are talking about a range to .7.
so it is relatively modest. it is getting attention at the moment but we are waiting to see what will actually happen. who will take the brunt of this cut? the middlemainly east producers rather than some of the other opec never such as nigeria? could the saudi's step up and take a very significant cut? assserting their position the policeman of opec, the balance of opec. it's a position they walked away from two years ago. are they going to move back? angie: what about the long-term outlook, does is change what companies decide to do, increasing production, expanding
oil rigs and the like? is this move enough? >> no, because there is a great deal of uncertainty about what will be implemented. it is bullish news at the moment and prices have come up, but they could well come back off again as people absorbed this. helpfulppens, then it's . it's in the knowledge meant that they cannot continue to pump out at record -- at record levels. the attention may turn to the fact that we have record high .lobal stocks that is huge. with an expectation that it will still be three by the end of 2017. that is massive.
one million is normal for working levels. is it tokenism? we need to see significant cuts and that those are following through. which nations are set to win here? saidclearly has already it's not going to be us. they look to be winners here. >> they certainly do. they seem to be reasserting the principal that they should have share ofup to a 13% opec production. so in a sense you could say iran is the winner, but again, we don't know exactly what has been agreed and what will actually be implemented. i would not rush out to suggest
yousef: welcome back to the "best of bloomberg markets: middle east." saudi arabia had indicated its willingness to cut production by up to a half million barrels a day. algeria's minister spoke about what he described as a critical tuition. >> i think of opec has decided to meet even in an informal meeting, that's because opec
thinks it is important to discuss the situation. since the last meeting, the situation has deteriorated. it is important to see what measures need to be taken in the short term to find a solution to a situation that's not benefiting any opec member. we're hoping the opec members will be able to make a decision or at least set out the principles of a decision for the november meeting in the end up. >> what do you think is likely to happen? >> today the most important is to stabilize the market. we will see a reaction and prices. i think several scenarios will be studied. we should not forget the issue
of prices. even though it will be a , do we want to go faster in rebalancing the market, or take a bit more time? caroline: they have offered to lower production and exchange for iran to freeze at current levels. importants a very member of the organization. saudi is ready to do the maximum for the success of this event. is ready for any eventuality. doha remember that the meeting failed because iran was opposing the deal. has returned close to pre-sanction levels, do you think a deal is more likely? in doha, iran was not present
. iran will be present in algeria so it is easier to discuss with those around the table than those who are not here. thinking,ng to saudi the meeting is more a confrontation, not a decision. do you agree? >> the ministers can decide during the meeting at any time to transform the informal meeting into an extraordinary meeting that will result in a decision. wants a production cut of one million barrels a day, is that correct? quick yes, the hope of algeria is to reduce reduction by about one million barrels a day to quicker ande market give stability to investors who are also waiting to make decisions. think if there is no
they will lose credibility? it's only a discussion forum. it is like the phoenix. opec is always rising from the ashes. opec is not dead yet. reasonable what is a oil price for algeria? algeria is working on diversifying its economy, which means less reliance on oil. the shortle price in term would be an oil price of around $60. angie: the country's credit rating was cut by movies. that spring and benjamin harvey for you right now. you spoke to president erdogan
just before the decision. what did he say? >> that's right, we spoke to him in new york on thursday. he told us he would not care if the rating was downgraded. he was expressing a predominant view in turkey which is that the ratings decision is based too much on intangibles rather than economic fundamentals which they argue are quite strong. >> let's talk about the market reactions. how much is already priced in on this downgrade versus the one we saw previously in the summertime? >> that is the big question. to getrs did have time
out of turkey. movies announced the downgrade on july 18. they did have time to get out, august, net flows into turkey were around $900 million. you might see more of a downside on this that's a yes they were not actually getting out, that this did come as a bit of a surprise. usie: constantine joins right now. how did the markets react to the downgrade and what are investors saying? the timing of the downgrade was a surprise. a lot of investors were expecting an announcement to come in october. bonds fell the most in emerging markets.
the lira was leading emerging market currencies for most of the day. there was also sizable demand and a bond auction. some are being attracted back in by the high yield after the selloff. the question for many investors is how much forced selling if any will there be? some of the biggest funds in the world require at least two major credit agencies to have an investment grade rating. dump of them will have to their positions. the markets trying to figure out how much of an outflow that will be. angie: what does this mean for turkey's economy and will the central bank keep easing? >> the question is how will the
downgrade affect banks borrowing costs. if it gets higher, their ability to pass on rate cuts to consumers is limited. .he economy is already slowing the bank admitted so in the last meeting. the question is will it feel like it has to keep doing so more aggressively and that could risk a week or lira. did the market get it right in the run-up to the decision? we will have the answer for you. this is bloomberg. ♪
view on the situation. is that theave seen shale producers have been more resilient than perhaps the market expected at the beginning of this oil price downturn. it's really a story of how to re-stabilize the market and support oil revenue until you see the fundamentals of the market changing. demand growth will be critical for that. even if we do see oil prices between 50 and $60 level, which we expect in 2018, we still fiscalto see very strong retrenchment coming up, especially from saudi arabia. that will lead to a week demand backdrop. a pickup and oil is very necessary for economic activity
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the economy is generally stable for now. some analysts are betting policymakers will switch from easing to tightening mode. is closeell us boeing to a multibillion-dollar deal with cutter airways. they are said to be in the late stages of talks for at least 30 wide-body jets. valued at $6.7 billion. although airlines usually negotiate discounts. it would be boeing's largest sale this year. day, thiss 24 hours a is bloomberg. let's get a quick check on how the markets have been trading in the asia-pacific today. >> feeling the downward pressure because of concerns over the health of the financial industry globally. we are seeing at least one positive, new
zealand homebuilder permits rising to a 12 year high. the cost speed down rum a 14 month -- the cost be down from a 14 month high. speculation that the be ok will not cut rates further. the shanghai composite in positive territory but the hang seng index losing ground by 1.3%. ground 1.4%osing and what is pulling down the market in japan are back share -- bank shares. concerns over the financial sector, oil and gas being the only one trading in positive territory right now. look at the japanese yen, not even a week or yen is helping those stocks.
again has been losing ground for four consecutive session. not really being felt by exporters in japan feeling the downward pressure. we are counting down to the reopened in hong kong and china at the top of the hour. this is bloomberg. yousef: welcome back to the "best of bloomberg markets: middle east." . the u.s. presidential election is six weeks away and the race has turned increasingly personal. the first head-to-head debate saw hillary clinton and donald trump clash sharply over rates, trade, and the economy. megan murphy has the details. >> i think the general consensus has been that hillary clinton clearly won this round with donald trump. she was prepared, she was even. she attacked him where it hurt, on his is news record, on his
failure to pay income taxes, and his temperament. her goal was to for -- project him as someone who lacks the qualifications to occupy the oval office. for donald trump, his campaign will be disappointed about how he answered some questions. questions on whether barack obama was born in the united states came up again and she was efctive about framing some of his comments about women at the end of the debate. that will stick and a lot of voters minds. one of the most important parts of the debate is to thwart perceived weaknesses. do you think they did that? clinton was effective in casting doubt on donald trump's is miss record, which is
something he gets very prickly about. time and time again he talks about the great business he has built. she did start to chip away at that and that was the real strength we saw tonight. the polls have tightened dramatically in recent months, in crucial battleground states. donald trump will have to go back and say where can i really hit her. he missed some open shots at her e-mail server and he said he pulled his own punches at the end of the debate. >> i thought it was great. greatbout making america again. she proved it is all talk, no action. for years and years she has been working on things and nothing ever gets done.
youhich objectives did achieve and which ones did you failed to achieve? >> i'm looking at all the online polls and we are doing really well. talk aboutill defeating isis. well, why didn't she do it? people who were going to be deported, instead they pressed the wrong button and what happened, they became citizens. our country needs help, mark. >> did she say anything tonight that she's -- that you think was false? >> sure she did. i didn't want to do my final attack, with respect to her ,usband and what took place because chelsea, who i happen to think is a wonderful young lady, was in the room and i just didn't think it would be appropriate, despite the fact
that she's been over $200 million on commercials. watched itbecause i this morning, if i'm not leading, i am tied, and we've just spent a tiny fraction of the money she's. -- money she has spent. thanks for being there live for us at hofstra university in new york. insisted thatn communicating with muslim nations is crucial, while donald trump had a different take on the region. >> you look at the middle east, it's a total mess. under your direction, to a large extent. you started the iran deal, that's another beauty, where you have a country that was ready to fall, they were choking on the sanctions, and now they will be probably a major power at some point pretty soon, the way they are going. >> donnell has consistently
insulted muslims abroad and at home when we need to be nationsing with muslim and the american muslim community. they are on the front lines. they can provide information to us that we might not get anywhere else. we're following the debate closely from dubai. what were some of the key takeaways from the middle east? the debate came into focus when they started talking about foreign policy and islam state. we had some great one-liners there when donald trump accused hillary of showing her cards and hillary kind of rebutted and set for going have a plan after islamic state. she spoke about how she would go after the group's leadership and how they would go after them online. she used it as an opportunity to
remind people about osama bin laden and how they took him out. donald trump didn't have many specifics other than going after clinton and saying you should never show your cards and tell people what you are about to do. he criticize countries like saudi arabia for basically taking a free ride and allowing the u.s. to support them on the fence. for me it was one of the high points of the debate and hopefully features more prominently in round two. they also had differing views on the iraq war. donald trump ordered that -- argue that failure to take control of the oil led to isis. >> isis would not have been able to form because the oil is their primary source of income, and now they had the oil all over the place including a lot of the oil in libya, which was another one of her disasters. >> donnell supported the
invasion of iraq. that has been proved over and over again. he actually advocated for the actions we took in libya and taken out gaddafi be after actually doing some business with him at one time. angie: iran came up repeatedly. how did the candidates fair there. ? sure the fact checkers are going into overdrive on that one because it featured so prominently. donald trump repeatedly going after clinton and saying islamic went from a baby under your watch to the monster that it is now, operating in all these countries. he hit her a couple of times on that point. clinton said i can build alliances, i can work with our allies.
we will go into iraq and take out islamic state there and squeeze them in syria. arabhen in syria with the and kurdish allies we will take islamic state on. that is the key point because turkey is bombing many of those kurdish groups. hopefully in the second debate we will hear more about that plan because that is really the crux of the debate in terms of how to get islamic state out of syria. who exactly can we work with and what alliances can we form? yousef: coming up on the "best of bloomberg markets: middle east." counting the cost of cheap injured -- energy. this is bloomberg. ♪
saudi stocks drop the most in the world on tuesday as the country announced measures to try to curb the budget deficit. our emerging markets editor has the story. can definitely tell that investors were very much concerned about the measures that were announced yesterday. the day before, actually. basically they see it as a measure that shows how serious the local government is when it comes to shoring up local fiscal accounts. publice salary of workers. of course that means less localng within the company and less revenue to the companies. we saw a very bad sentiment within the saudi market all day long yesterday. people were not considering that even though this is a measure that is seen as supportive to the country's economy as a
whole, local companies will be impacted. people will be spending less. >> so which stocks were pressured the most here? a very directe impact mostly in the hotel and tourism sector. that was the industry that had the worst performance when you look at the percentage basis. , whichclined almost 10% brings the index back to the levels seen in february. they were dramatically impacted. biggest driver to the index, we have the biggest bank in saudi arabia. tourism,thin the retail, media industries were dramatically impacted all day long yesterday. angie: thank you so much for
that. let's get more perspective on the massive saudi drop in the markets. joining us from dubai is the ceo of nomura international. it was incredible to see just the market response, but also, what was the general response to this quite unexpected move, perhaps? announcements had a number of effects. one effect was actually a signal to the potential investors, the bonds that saudi arabia is expected to choose later this year. that was one of fiscal discipline and the saudi government is taking seriously the recommendation to reduce the public-sector wage bill from
about pretty -- 45% of the budget to 40% by 2020. a lot of this has to do with trying to rekindle investor .onfidence currently, the market is the worst performer across the middle east. what's going to get investors to put money to work again in the saudi stock market if it's not fiscal discipline? >> that's a very good question. of the 94 primary markets that bloomberg covers, i think the saudi market has outperformed only about five or six this year. it's been a terrible performer. please bear in mind that the saudi market is dominated by and sentimentrs plays a very large role in how they think and act. what we are missing in the saudi market is something that's been
missing for a long time now, it's institutional and foreign investors. we need to be in a situation where the foreigners have easier access to the saudi stocks, because they are not expensive. the market is trading on about 13 times earnings, a dividend yield of 4%. lookinge reasons to be at the country and to buy stocks at this level. i'm pretty optimistic for the year end. how much of this has to do with what is going on here in algiers? not gettingroposal as much traction at the beginning. it still might change later on in the day as opec convenes at 3:00 p.m. local time. do you expect them to come to some sort of consensus? >> it seems unlikely this time.
this is not a formal opec meeting. more likely we will get an agreement in november. at that time iran has achieved its 4 million barrels per day target. that removes one of the obstacles that seems to be delaying an agreement. in any case, our belief is that oil prices have bottomed. the industry levels continued to decline. bear in mind that opec has increased output i about 3 million barrels per day so that has been a huge addition to the market. it seems to have been gradually absorbed and we have a situation where the demand for supply is tighter than it was a year ago. think we do get some kind of agreement in november. analysts saidoup the prosperity that currently , none of the current
scenario seem plausible. ins opec need to take action coordination with russia, take oil out of this market one million barrels a day at least to be able to support prices and bring them back to the level they are looking to bring them back to? >> i don't think they need to bring the levels very much higher than where they are today. honestly, i don't think they need to take very much action because the market itself is taking care of the supply side. demand is relatively steady. supply is the issue, of course. all the opec members are pumping out as fast as they can. output is at the highest level it's been in a long while. on the supply side it will be to the upside and not the downside. i don't think we need to see
yousef: welcome back to the "best of bloomberg markets: middle east." earlier in the week, former israeli president shimon peres died at the age of 93. had been in the hospital for two weeks after suffering a severe stroke. >> he had one major goal throughout his life, throughout his career, which was to ensure for israel would be secure o the long-term.
he began his career at a young minister davidme ben gurion. peres was sent on secret missions to try to procure arms for the new state. israel was vastly outnumbered and outgunned. he's exceeded in doing that. much later in his career he became a dove and champion of middle east is making, for which of course he became very famous. he talked with bloomberg back in 2012. he said, many people say i was wrong when i talked about the new middle east and the need for more ties with our arab neighbors. i'm not wrong, he said to us, it's just taking more time than i thought. this is really kind of indicative of the man in his twilight years. was there any indication that he was disappointed or still
working to press on with these? peace?ress on with >> he was not naïve or gullible. what he thought needed to take place really does need to take place with leadership. he was quite critical in recent years, privately at least, and i think more will come out publicly in the days ahead, of the current leadership or lack thereof. we don't have leaders to implement and make decisions and take calculated risks for peace, -- untilwill not have you have the right leaders who are willing to take those risks for peace. yousef: what will he be most remembered for? >> he will be most remembered for the oslo accords. some people credit him for them .nd many others blame him
there are still some elements of the oslo accords that remain in a handful of israelis and palestinians are for it. really created was security for the state of israel. many people forget that israel was not always a regional superpower, it was not always a israel is all and those things due to his early activities in the 1950's, 1960's, and up until he became the peacemaking politician that we know him to be today. this "bestt's it for of bloomberg markets: middle east." we've got a busy week ahead. we will be looking forward to economic data in the form of pmi's coming out for some of the gulf countries and numbers coming out from one of the world busiest airports, dubai airport.
anna: deutsche bank anxiety grows. equities are sent lower in the u.s. and asia. china's challenges. the yuan is going to join the elite class of global currencies this weekend. will the pboc needed to tighten policy next year? almost 100 days of flying blind. a lack of clarity is making u.k. companies more reluctant to invest.